Numerous fraudulent credit card transactions have occurred as result of on-line, in-store and over-the-phone security breaches. Causes of security breaches include user negligence, such as credit card loss or poor disposal of documents, as well as merchant negligence, such as leaving databases vulnerable to hackers or loss of portable computers. Overall, the credit card industry spends millions of dollars a year because of fraudulent transactions.
Banks and the credit card industry have invested large amounts of money to develop software that analyzes cardholder buying habits to detect unusual card transactions. Some of these detections are inaccurate, however, and can cause inconvenience. They may also only detect a fraudulent transaction after it has been completed, and may therefore only prevent a possible second attempt.
For these and other reasons, improvements in transaction security could be of great benefit to financial institutions, such as credit card issuers, and their customers.